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UNAUDITED CONDENSED RESULTS FOR THE PERIOD ENDED 31 AUGUST 2012
WG Wearne Limited
(Incorporated in the Republic of South Africa)
(Registration number 1994/005983/06)
JSE Code: WEA
ISIN: ZAE000078002
("Wearne" or "the company" or "the Group")
Unaudited condensed financial results
for the period ended 31 August 2012
Condensed Interim Consolidated Statement of Financial Position
Unaudited Restated Audited
6 months 6 months 12 months
August 2012 August 2011 February 2012
R'000 R'000 R'000
ASSETS
Non-current assets 362,479 348,275 376,026
Property, plant and equipment 357,815 342,544 370,803
Other financial assets 4,664 4,114 5,223
Deferred taxation asset - 1,617 -
Current assets 87,626 76,198 70,058
Inventories 20,514 12,608 17,305
Loans receivable - 1,652 -
Other financial assets 3,314 2,850 4,014
Trade and other receivables 59,558 43,664 42,371
Cash and cash equivalents 4,240 15,424 6,368
Non-current asset held for sale 4,500 4,969 4,500
Total assets 454,605 429,442 450,584
EQUITY AND LIABILITIES
Equity 48,659 39,589 52,786
Issued capital 177,857 178,215 178,357
Reserves 345 452 345
Revaluation reserve 43,299 - 43,299
Accumulated (losses)/profits (172,842) (139,078) (169,215)
Non-current liabilities 247,185 277,083 278,091
Borrowings 223,524 248,435 252,281
Deferred taxation liability 8,795 891 8,921
Trade and other payables - 13,410 2,023
Environmental provision 14,866 14,347 14,866
Current liabilities 158,761 110,872 119,707
Loans payable 5,045 5,523 5,193
Borrowings 39,553 47 10,751
Current taxation payable 1,676 2,390 1,821
Trade and other payables 64,063 70,653 71,437
Bank overdraft 48,424 32,259 30,505
Non-current liabilities held for sale - 1,898 -
Total liabilities 405,946 389,853 397,798
Total equity and liabilities 454,605 429,442 450,584
Number of shares in issue ('000) 273,038 273,017 273,038
Net asset value per share (cents) 17.82 14.50 19.33
Net tangible asset value per
share (cents) 17.82 14.50 19.33
Condensed Interim Consolidated Statement of Comprehensive Income
Unaudited Restated Audited
6 months 6 months 12 months
August 2012 August 2011 February 2012
R'000 R'000 R'000
Continuing Operations
Revenue 212,720 175,992 305,870
Cost of sales (181,161) (153,285) (247,798)
Gross profit 31,559 22,707 58,072
Other income 561 2,089 3,397
Operating expenses (22,253) (34,215) (79,815)
Earnings/(loss) before
interest and taxation ("EBIT") 9,867 (9,419) (18,346)
Investment income 97 112 1,546
Finance costs (13,729) (15,649) (35,928)
Loss before taxation (3,765) (24,956) (52,728)
Taxation 138 (563) 425
Loss from continuing operations (3,627) (25,519) (52,303)
Profit/(loss) from
discontinued operations - 707 (2,650)
Loss for the period (3,627) (24,812) (54,953)
Other comprehensive income
Fair value adjustments:
Available-for-sale - 78 213
Release of reserves - - (242)
Gain on revaluation - - 54,357
Deferred tax on revaluation - - (11,058)
Total comprehensive loss
for the year (3,627) (24,734) (11,683)
Total comprehensive (loss)
attributable to:
Owners of the parent (3,627) (24,734) (11,683)
Reconciliation of EBITDA:
Earnings/(loss) before interest
and taxation ("EBIT") 9,867 (9,419) (18,346)
Depreciation - Cost of Sales 17,617 20,295 32,946
Depreciation - Operating Expenses 358 1,000 5,696
Earnings/ (loss) before interest,
taxation, depreciation and
amortization ("EBITDA") 27,842 11,876 20,296
Weighted average number
of shares in issue('000) 273,038 208,001 240,334
Fully diluted weighted average
number of shares ('000) 273,038 208,001 240,334
Continuing operations Basic
and diluted loss
per share (cents) 1.33 12.27 21.76
Continuing and discontinued
operations basic and diluted
loss per share (cents) 1.33 11.93 22.86
Basic and diluted
headline loss per share (cents) 1.28 9.03 19.88
Reconciliation of
headline earnings:
Loss for the year (3,627) (24,812) (54,953)
Impairments and scrapping loss - 4,308 3,506
Loss / (profit) on sale of
property, plant and equipment 139 1,727 735
Profit on sale of
interest in joint venture - - (1,212)
Fair value on non-current
Assets held for sale - - 4,139
Headline loss attributable to
ordinary shareholders (3,488) (18,777) (47,785)
Condensed Interim Consolidated Statement of Changes in Equity
Unaudited Restated Audited
6 months 6 months 12 months
August 2012 August 2011 February 2012
R'000 R'000 R'000
Balance at beginning of period 52,786 61,451 61,451
Total comprehensive loss
for the period (3,627) (21,734) (54,953)
Other comprehensive income - 78 43,270
Issue of share capital
net of expenses - 11,638 11,638
Redemption of shares - (7,926) (7,926)
Movement treasury shares (500) (133) 8
Non-controlling interest - (785) (702)
Balance at end of period 48,659 39,510 52,786
Condensed Interim Consolidated Statement of Cash Flows
Unaudited Restated Audited
6 months 6 months 12 months
August 2012 August 2011 February 2012
R'000 R'000 R'000
Cash flows from operating activities (15,483) (1,167) (3,711)
Cash flows from investing activities (4,083) 24,839 25,048
Cash flows from financing activities (483) 31,095 25,137
Net cash flows from
continuing operations (20,047) 54,767 46,474
Net cash flows from
discontinued operations - - 991
Net change in
cash and cash equivalents (20,047) 54,767 47,465
Cash and cash equivalents
beginning of period (24,137) (71,602) (71,602)
Cash and cash equivalents at end
of period (44,184) (16,835) (24,137)
Segmental reporting
Unaudited Restated Audited
6 months 6 months 12 months
August 2012 August 2011 February 2012
R'000 R'000 R'000
Revenue: External sales
Aggregates 111,054 110,636 174,361
Readymix concrete 95,092 56,954 118,262
Concrete manufactured products 6,574 8,402 13,247
Total revenue: External sales 212,720 175,992 305,870
Revenue: Inter-segment sales
Aggregates 27,134 20,487 41,793
Readymix concrete - 301 301
Concrete manufactured products - - -
Total revenue: Inter-segment sales 27,134 20,788 42,094
Revenue: Total sales
Aggregates 138,188 131,123 216,154
Readymix concrete 95,092 57,255 118,563
Concrete manufactured products 6,574 8,402 13,247
Total revenue: Total sales 239,854 196,780 347,964
Property, plant and equipment
Aggregates 292,116 270,504 289,382
Readymix concrete 43,414 48,915 58,641
Concrete manufactured products 22,285 23,125 22,780
Total property, plant and equipment 357,815 342,544 370,803
Total assets
Aggregates 354,751 331,394 354,175
Readymix concrete 75,386 65,206 71,917
Concrete manufactured products 24,468 32,842 24,492
Total assets 454,605 429,442 450,584
INTRODUCTION
WG Wearne Limited and its subsidiaries ("the Group") provide a comprehensive range of
products to the building and construction industry in South Africa. The major operating
divisions comprise aggregates, ready mixed concrete and the manufacture of precast
concrete products.
REVIEW OF RESULTS
For the six months ended 31 August 2012 ("2012 period")the Group generated revenue of
R212.7 million (2011: R175.9 million) which represents a growth of 20.87% when compared
to the six months ended 31 August 2011 ("2011 period"). The growth in revenue was realized
in the Group's ready mixed concrete division which yielded a 66.69% or R38.1 million
increase in revenue period-on-period. The Group's aggregates division has remained a
consistent contributor to the Group's turnover whilst the precast division has shown a
21.76% or R1.8 million decrease in revenue.
The increased revenues in conjunction with the Group's focus on efficiencies has resulted
in a 1.9% increase in the gross profit margin and consequently an increase in gross profit
of 38.98% or R8.8 million.
As a result of streamlining overhead structures and the implementation of cost monitoring
processes in the prior year, operating expenses has decreased by 34.96% from R34.2 million
to R22.2 million.
The Group's EBITDA increased by 134.5% to R27.8 million (2011 period: R11.9 million) for
the six months ended 31 August 2012 ("2012 period").
Finance costs decreased by 12.27% to R13.7 million (2011 period: R15.6 million). The savings
in finance costs arose as a result of the reduction in installment sales agreements and term
loans as part of the unproductive asset downsizing initiative undertaken in the prior year.
As a result of the increased revenues, increased margins and the reduction in operating
expenses the Group reduced its total comprehensive loss by 85.34% or R21.1 million to
R3.6 million (2011 period: R24.7 million). Consequently the basic and diluted headline loss
per share decreased from 9.03 cents to 1.33 cents per share. Continuing and discontinued
operations basic and diluted loss per share decreased from 11.93 cents to 1.33 cents per share.
Lastly, the Group's net asset value per share increased by 22.9% to 17.82 cents per share
(2011 period: 14.5 cents per share).
NET CHANGE IN CASH AND CASH EQUIVALENTS
Bank and cash
Unaudited Restated Audited
6 months 6 months 12 months
August 2012 August 2011 February 2012
R'000 R'000 R'000
Cash on hand 182 234 302
Bank balances 4,058 15,190 12,692
Invoice discounting facility (19,673) (1,926) (6,626)
Bank overdraft (28,751) (30,333) (30,505)
Cash and cash equivalents,
end of period (44,184) (16,835) 24,137
For the current period the net cash outflow of R20 million (2011: inflow of R56.7 million)
highlight a significant utilization of cash reserves. The primary outflows have arisen from
operating activities and investing activities.
Included in the cash outflows for the period are payments to concurrent creditors amounting
to R11.4 million (2011: R nil) in terms of the Creditors' scheme of arrangement. In terms
of the scheme the Group was only required to make payment to concurrent creditors from
September 2011. In addition, the Group has incurred capital expenditure of R6.8 million
on plant and equipment.
Lastly, the Group has seen its sales grow by 20.87% period on period and consequently its
trade and other receivables by 40% or R17.2 million from its financial year end.
PROSPECTS
The prospects for the Group continue to improve on a monthly basis however; the general market
conditions remain challenging for the construction industry. The Group managed to break even
in five of the six months under review with losses been realised in April 2012 as a consequence
of the public holidays reducing the number of days available for trading.
In line with its asset utilization strategy the Group has right sized its fleet enabling it
to implement a flexible fleet management model based on business needs. This will allow the
Group to react more rapidly to changes in its operating environment. Even though most of the
Group's assets are now fully utilized, the excess capacity in the industry still makes it
difficult for the Group to achieve attractive margins in the marketplace.
Conditions in the ready mixed concrete market have improved considerably over the last six
months as more of the smaller operators have exited the industry. Despite these players exiting
the market, highly competitive pricing conditions have resulted in greater discounting on major
concrete projects. Although no major growth is forecasted by the cement industry there are some
major concrete projects in Gauteng, such as the Steyn City development, which should lead to
positive growth for the ready mixed concrete division.
The aggregate business environment in Gauteng remains competitive. Even though volumes sold are
pleasing, the majority of the products are sold at a low average selling price. The aggregate
volumes in the Limpopo province saw a significant decline due to the freezing of all tenders
issued by the Limpopo Roads Agency. The Free State quarry performed well due to a major SANRAL
road contract as well as the building of a large shopping centre in Bethlehem. These projects
will continue into the second half of the year. The prospects for the Kwazulu Natal quarry looks
very positive after a major plant refurbishment was completed. The planned investment in further
rail infrastructure by Transnet will have a positive influence on the aggregate business as the
demand for ballast stone is set to increase significantly.
The mobile crushing and drilling & blasting business, included under the aggregates division,
performed well in the period under review. Opportunities for the expansion of these businesses
into mining contracting still exist but it will require further capital expenditure. The planned
infrastructure spend by Government should also lead to further growth opportunities for this division.
The Precast concrete business performed admirably in a challenging environment as it was also
negatively affected by the Limpopo Road Agency issues. Market conditions should improve by the
end of the 2013 financial year. The board is currently reviewing its investment in this business
as it is a non-core activity.
GOING CONCERN
Solvency and Liquidity
Realizing a total comprehensive loss of R3.7 million for the 2012 period the Group continues to remain
in a loss making position. This coupled with the negative liquidity position highlights a possible
going concern issue. Included in Current Liabilities is the Bank Overdraft of R28.75 million as well
as R14.3 million in terms of the Creditors' scheme of arrangement. Negotiations are currently underway
to either sell further properties in the portfolio or extend the repayment terms of the overdraft. All
debt outstanding in terms of the Creditors' scheme of arrangement will be settled by 28 February 2013.
In addition, the Group has undrawn loans totalling R16 million from the IDC at 31 August 2012. In response
to this position the Group has been working closely in conjunction with its financiers in order to meet
all its working capital requirements and the repayment terms of its Creditors' scheme of arrangement.
The Group continues to maintain a solvent position with a net asset value of R48.7 million or 17.82 cents
per share.
Cash Flow
In line with strict cash flow management policies the Group has managed to meet its working capital
obligations and repayment in terms of its scheme of arrangement. In addition, the Group has a facility
of R16 million available from the Industrial Development Corporation against which it can draw.
Cash Management
The Group has been operating under a cash management program with its financiers for the last 17 months,
which has seen the Group bridge its working capital demands. Under this management program the Group has
met all its short-term obligations arising from both operations and its scheme of arrangement.
Continued Focus
Management continues to review all aspects of the business in order to ensure that resources are being
utilized effectively. This ensures that all cost areas are closely monitored in order to reduce
expenditure and release cash reserves for the Group's working capital.
In light of the above, the going concern basis has been adopted in preparing these interim financial statements.
The directors have no reason to believe that the Group or any company within the Group will not be a going
concern in the foreseeable future.
COMPARATIVE FIGURES
The comparative figures for the 2011 period, as announced on SENS on 1 December 2011,has been restated
due to certain items of direct salaries, direct overheads and direct depreciation being reclassified
from operating expenses to cost of sales in terms of IAS 1: Presentation of Financial Statements.
The reclassifications had no net impact on the results of the Group.
BASIS OF PREPARATION
These unaudited condensed consolidated interim results have been prepared in accordance with and contain
the information required in terms of International Financial Reporting Standards ("IFRS"), the Companies
Act of South Africa (Act 71 of 2008), as amended, and International Accounting Standards
(IAS 34: Interim Financial Reporting), AC 500 standards as issued by the Accounting Practices Board and
in compliance with the Listings Requirements of the JSE Limited. The accounting policies and standards
used to prepare these interim financial statements are in terms of IFRS and are consistent with those
applied in the prior interim period and at year-end 29 February 2012, except for the application of
IAS 1 (revised): Presentation of Financial Statements.
These condensed interim consolidated financial statements incorporate the financial information of the
company, its subsidiaries and special purpose entities that, in substance, are controlled by the Group.
Results of subsidiaries are included from the effective date of acquisition or up to the effective date of
disposal. All significant transactions and balances between group enterprises are eliminated on consolidation.
DIVIDENDS
In line with past practice, no dividend has been declared for the period.
The preparation of the condensed interim consolidated financial results was supervised by JJ Bierman (CA) SA.
By order of the board
6 November 2012
S J Wearne
Chief Executive Officer
J J Bierman
Chief Financial Officer
CORPORATE INFORMATION
Non-executive directors: M M Patel (Chairman); MC Khwinana; M Salanje; WP van der Merwe
Executive directors: S J Wearne; J J Bierman
Registration number: 1994/005983/06
Registered address: 3 Kiepersol House, Stone Mill Office Park, 300 Acacia Road, Cresta, 2195
Postal address: PO Box 1674, Cresta, 2118
Company secretary: Ithemba Governance and Statutory Solutions (Pty) Ltd
Telephone: (011) 459 4500 Facsimile: (011) 478 5481
Transfer secretaries: Computershare Investor Services (Pty) Ltd
Designated Adviser: Exchange Sponsors (2008) (Pty) Ltd
These results and an overview of Wearne are available at www.wearne.co.za
Date: 06/11/2012 09:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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